WASHINGTON-America's Community Bankers and the Independent Community Bankers of America have questioned NCUA's ability to maintain the safety and soundness of credit unions in the face of a staffing shortage. In a letter to House Financial Services Committee Chairman Mike Oxley (R-Ohio), the groups noted a transcript from NCUA's July board meeting in which former NCUA Board Member Debbie Matz expressed concerns over the agency's then 35 vacancies. "I want to focus on the staffing because that's something that I continue to be concerned about," the transcript, attached to the letter, read. "There are two numbers in the insurance and budget reports that I think are serious concerns for NCUA: the 35 staff vacancies and the 7,500-hour deficit in our examination program. "It seems like having a large number of vacancies has become a way of doing business and a systemic problem at NCUA in that our employees now are spread very thin.So that means we're behind on the most important job that we do, which is examining all federally insured credit unions. That's what we're all about, protecting safety and soundness." The ACB/ICBA letter explained, "As of that time, there were 281 credit unions with a CAMEL rating of 4 or 5. Furthermore, the examination deficiency has occurred during the same time that the credit union industry has greatly expanded their lending products, particularly into the more complex business lending products. This is a situation that could become a potential crisis that should be reviewed." The letter suggested that the congressman request a Congressional Budget Office or Government Accountability Office report "to determine the implications this deficiency may be causing to the safety and soundness of the credit union industry." The community bankers used the transcript to support their argument. "It's taking larger teams of examiners to effectively examine the large credit unions," Matz had said. "So I conclude that our 35 vacancies and our 7,500-hour examination deficit are the main reasons that we have more large credit unions in trouble." ACB Regulatory Counsel Krista Shonk explained, "The 7,500 number came up at the July board meeting. It was an astronomical number of hours to be behind.As members of the financial services industry, we don't want to see a credit union fail." She added that ACB believes consumers do not differentiate credit unions and banks so if credit unions are not safe and sound that could have a direct impact on banks and thrifts as well. ICBA Senior Vice President Steve Verdier agreed. "In ultimate, we'd like to see the regulation and supervision of credit unions improved," he said, noting that credit unions converting to banks have said they find "a more serious level of regulation and supervision.much more serious level of examination in a whole host of areas." Verdier added, "Our interest is in the proverbial level playing field" and ICBA is finding now the differences are not just taxes and the Community Reinvestment Act. CUNA President and CEO Dan Mica blasted the bankers in response. "Credit unions have nothing to apologize for when it comes to safety and soundness," he stated. "Our strong capital position – exceeding 11% – and minimal losses were noted as recently as yesterday's NCUA Board meeting. Furthermore, it's astounding to hear any banker trades, especially ones that include the remnants of the thrift industry, express any opinions whatsoever about the adequacy of credit union regulation, given their record of failure in this area. Moreover, the banking industry's significant and costly violations of the Bank Secrecy Act show they still haven't put their own house in order." Never underestimate the community bankers' ability for "mischief-making" is what Matz said she has learned from her time in credit unions. "They've taken my words out of context and used them in a very manipulative way," she said. As a regulator, Matz explained, she had the responsibility to look at all agency resources. "I was exercising my regulatory responsibility but it was not a clarion call that a crisis was imminent." Matz added that the letter seemed to imply that the situation had something to do with her resignation. "It had nothing to do with my resignation. My term was over and I left," she said. NCUA Chairman JoAnn Johnson, the only other seated board member at the time of the July meeting, told Credit Union Times, "The NCUA is strongly positioned from a staffing standpoint to address normal and any anticipated contingencies. Most recently, the agency reallocated resources after Hurricanes Katrina and Rita without adversely impacting operational programs. The wise use of agency resources remains a high priority." According to NCUA, the community banking trades should be able to sleep better at night knowing that the agency was up-to-date on its examinations before year-end. NCUA has caught up some on its vacancies as well. Openings have been reduced from 35 to 29 with the large majority coming from the central office and regional office; only eight of the vacancies are for field examiners. A good number of the remaining vacancies should fill quickly as the new board members settle in and appointments are made. About 2% is the maximum vacancy level the federal financial institutions regulatory agencies try to adhere to. As of June 30, NCUA was 96.4% of full-time equivalents (FTEs) filled with 35 vacancies. As of Nov. 30, the agency stood at 97.0% with 29 vacancies. By comparison, the Office of Thrift Supervision was 98.5% staffed as of Oct. 31 and the FDIC was at 98.6% of FTEs filled as of Nov. 30, according to spokespersons for the agencies. ACB Senior Lobbyist Greg Mesack said this was not a coordinated effort with Oxley's office. "We gave them a heads up that the letter was coming. That's kind of the standard operating procedure," he explained. The groups had not gotten a response as of deadline, but he said it is the end of the congressional session and they really did not expect to hear anything until Congress returned. NAFCU Director of Political Affairs Murray Chanow said lobbyists there had been in contact with Oxley and House Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus' (R-Ala.) offices. "They know credit unions are operating in a safe and sound manner.I've not seen any response from either of them, nor do I expect one," he said. On one hand, Chanow analyzed, the action appears "ill-timed" with the congressional session ending. However, the banking groups also know that credit unions will be meeting with the lawmakers back in their districts and, in a "purely political" move, they may have been aiming to set the tone of those meetings. The lobbyist also pointed out that NCUA has the most open budget process of any regulator and the banking trade associations had ample opportunity to comment then. CUNA SVP of Communications Mark Wolff commented, "With the end-of-the session crunch on Capitol Hill, we've not yet had an opportunity to talk with Chairman Oxley's staff about the ACB/ICBA letter. When we do, that will determine our next steps." They may consider the source and ignore it, he said, especially since credit unions are strong and the industry has an unblemished record regarding safety and soundness. -

[email protected]